GRAND RAPIDS — Since September 2017, Metro Health – University of Michigan has signed up 20 employers that contract directly with the health system to provide medical care for some 4,000 employees and their dependents.
As direct contracting in health care emerges and gains more attention, Metro Health now looks to dive deeper into direct contracting through Metro Health Direct Care, a plan offered to employers that self-fund their health benefits.
Metro Health Direct Care offers employers a “price concession” on the coverage compared to other health plans in the market “because we want those patients to come here,” said Dr. Rakesh Pai, the medical group president and chief population health officer at Metro Health.
Pai aims to grow the direct-contracting product for the health system.
“It’s up until now something we’ve been supporting in addition to all of our other jobs. It’s to the point where it needs some dedicated people,” Pai said. “We’re pushing it and scaling up for it. Once you start to support it, I think it will build and more (employers) will come because a lot came without us having a lot of infrastructure to support it.”
As well, Mercy Health, which operates hospitals in Grand Rapids and Muskegon, also looks to move into direct contracting in West Michigan. The health system is in ongoing talks with two “decent-sized” self-funded employers in the Grand Rapids area about contracting directly for employee medical care, said Shaun Raleigh, executive director of Mercy Health’s clinically integrated network.
The two employers combined would enable Mercy Health to exceed a goal of covering 3,000 lives in the first year through direct contracting. Mercy Health is targeting small and mid-sized employers to directly contract for care starting in 2020, Raleigh said.
“We’ll talk to anybody from small on up that would be willing to enter into a self-funding arrangement,” she said. “As we get better and more efficient at keeping people healthier, it becomes more important to us to become an attractive partner to attract patients, and the employer segment is definitely a way to do that.
“It’s an integral part of our growth strategy.”
The moves by both Metro Health and Mercy Health come as more employers nationally grow frustrated by rising costs and poor outcomes and become more interested in direct contracting, which essentially takes a health insurer out of the equation, other than to act as a third-party claims administrator.
Mercy Health uses ASR Health Benefits, a Grand Rapids-based provider of self-funded benefits, and Meritain Health Inc., owned by national commercial insurance carrier Aetna Inc., as the third-party administrators for its direct contracting, Raleigh said.
Meanwhile, Metro Health does not yet have a preferred third-party administrator now, but has employers who use ASR, according to Pai.
As employers search for new ways to drive quality up and cost down, Metro Health and Mercy Health each see opportunity to engage with them directly, rather than work through an insurer that provides health benefits and contracts with a network of care providers.
“Health insurance companies drive relatively little value. They’re a classic middleman industry. They’re not taking care of the patients, and we feel if we’re able to provide comprehensive cost and quality data to these groups, then we should do that and we should own that message,” Pai said.
Raleigh describes Mercy Health’s move into direct contracting as an extension of the work it is already doing through on-site health clinics for employers and by offering biometric health screenings in the workplace.
Mercy Health’s focus aligns with what employers want, namely better health for employees, better care, and lower costs, Raleigh said. The health system also has been involved in advanced Medicare models that impose greater accountability on care providers for cost, quality and outcomes.
“We’re already doing this with the payers. It only makes sense to extend that conversation out to the employers,” Raleigh said. “We have relationships with the employer community, so as we started to talk about how to take this to the next level, we got just a ton of interest and inquiries.”
Directing contracting between care providers and health systems for primary care and hospital care is an emerging industry trend nationally. A number of major self-funded employers including Boeing Co., Walmart Inc., Lowe’s Companies Inc., and more recently General Motors Co. contract directly with health systems.
In the annual health benefits survey last year from the National Business Group on Health, 11 percent of responding large employers said they intended to contract directly with health systems and care providers in 2019. That compares to 3 percent of respondents in 2017 who said they did direct contracting.
Direct contracting between employers and so-called “centers of excellence” that excel in medical specialties such as cancer or cardiovascular disease increased to 18 percent last year from 12 percent in 2012, according to the National Business Group on Health.
The trend emerges as employers want to gain better control over what they spend on employee health care, leading some to pursue “a significantly different approach,” said Mike Hill, founder of Total Control Health Plans in Holland.
As insurance costs keep rising, employers also have hit the limit on how much of the burden they can shift to employees through high-deductible plans, co-pays and premium contributions.
“To truly have change, each employer needs to be put in a position to take control of their health care supply chain and manage it,” said Hill, who formed Total Control in 2018 to offer self-funded plans and direct contracting.
Direct contracting represents “another option that employers can put on the table” when reviewing their health benefits, Hill said. That option should come with full transparency and tools worked into the benefits that enable employees to look up quality data on providers and the cost and price of medical procedures and tests so they can “make informed choices,” he said.
Hill considers direct contracting as a way for employers to “build a plan that’s best for them” and manage their health care costs just as they would with any other supplier or vendor relationship.
“Businesses should be put in the same position to do the exact same with their health plan,” he said.
Under direct contracting, self-funded employers can fashion a health plan that directs employees to use preferred care providers who work with the company to control and lower costs, as well as improve and maintain employee health. Employers may fix zero or low deductibles, premium contributions, and co-pays into their benefits packages, providing an incentive for employees and their dependents that use a preferred health system and its doctors and hospitals.
An essential element of any self-funded plan where an employer contracts directly with a care provider is the ability to get and analyze cost and quality data, said Bob Hughes, principal of Advantage Benefits Group Inc. in Grand Rapids.
“Direct contracting is useless unless you have the proper data. It’s easy to say you’re going to steer people to the lowest cost provider because every provider will tell you they are a lowest cost provider. To do real direct contracting, you need to have actual price and quality information that is accurate and based off of a common denominator,” Hughes said. “As we know, discounts are thrown around by everyone, but what is the actual baseline? True data is having actual claims data to live claims and using Medicare reimbursements as a measurement point. Only with real pricing and quality info can you steer in the right direction.”
By directly contracting with employers, health systems are taking on greater financial risk but could receive greater rewards by meeting performance metrics written into the agreements. Generally, health systems are rewarded financially when data show they have improved the health of an employer’s workforce over time, raised the bar on quality, reduced costs, and eased the overutilization of care. If not, they get penalized by the employer.
“The more risk a provider takes on, the more opportunity for reward,” said Dawn Kopacz, manager of U.S. health plans for General Motors, which last fall signed a contract with Detroit-based Henry Ford Health System for about 27,000 salaried employees in Southeast Michigan.
“We want providers to take accountability for our employees,” Kopacz said during a March presentation in Grand Rapids at the annual health benefits seminar organized by Advantage Benefits Group.
Likewise, contracts for Metro Health Direct Care include accountability metrics that come with rewards and paybacks, Pai said.
“When we hit those quality targets and those utilization targets, we would get a little bit of a kicker to us for delivering a good job to your population. And if we didn’t, then we would hold a little back on the premium and give it back to you as a credit because we didn’t meet those goals,” he said.
GM pursued direct contracting as costs continued to rise without better care, improved outcomes or higher satisfaction rates among employees, Kopacz said. Using Blue Cross Blue Shield of Michigan as a third-party administrator, the corporation offered the plan as an option for employees to consider in the 2018 open renewal period. About 10 percent of employees enrolled in the first year, which Kopacz called a “good start for us.”
GM hopes to have 100 percent employee participation within five years for ConnectedCare, which costs employees less than other options for health benefits, according to Kopacz.
In developing ConnectedCare, GM sought a robust care network that “needed to do everything from a hangnail to a transplant,” she said. After multiple rounds in seeking requests for proposals, GM chose Henry Ford Health System from four bidders for the contract.
The ability to offer a broad, comprehensive care network remains an issue for Metro Health Direct Care. The health system lacks certain services such as a durable medical equipment provider or prosthetics clinic, nor does it perform specialized procedures such as heart surgery, Pai said.
That’s limited the product’s appeal and ability to drive volumes at Metro Health, as employees at participating employers go elsewhere for specialized care, he said. Metro Health is talking with parent University of Michigan Health System about getting involved in Direct Care to provide specialized medical services.
“We’re working to talk with the university on how they can support our product,” said Pai, who would like to see Direct Care double within two to three years after Metro hires needed support staff, brings aboard U-M, commits to a couple of third-party administrators and “professionalizes the product.”
“Then you have a pretty comprehensive solution there. Employers want to know that if those situations do arise, their employees and dependents are covered in all of those different scenarios,” he said.
Employers using Direct Care also can purchase a second-tier care network for employees to access when they need care while outside of Metro’s service area, he said.